⚡ Has Emerson Protected Itself In The Aspen Deal?

Boeing's vaccination task; Chip shortage haunts Apple.


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⚡ Emerson Electric: Live Wire Earthed?

Industrial giant Emerson Electric Co. (EMR)  will combine its industrial software business with Aspen Technology Inc. (AZPN) in a deal worth $11B. This marks another step in Emerson’s strategy to build a diversified and sustainable industrial software company. (Tweet This)

Stodgy Vs. Dodgy

Founded in 1890, Emerson Electric is a product manufacturer and engineering service provider for industrial, commercial, and consumer markets. It was the first company to sell electric fans in the US in 1892.

Today, Emerson has 200 manufacturing plants around the world with over 80K employees. It comprises five major business segments – Network Power, Process Management, Industrial Automation, Climate Technologies, and Commercial & Residential Solutions.

Last year, Emerson acquired utilities-focused enterprise automation software company Open Systems International for $1.6B. Emerson also catered to the mining industry through its Geological Simulation Software business. These businesses were part of Emerson’s efforts to make itself a player to reckon with in the industrial software industry.

Aspen Technologies was founded in 1981 due to joint research between the Massachusetts Institute of Technology (MIT) and the US Department of Energy on the Advanced System for Process Engineering (ASPEN) project. The company comes with some baggage.

In 2004, Aspen was the target of a class-action lawsuit for issuing misleading statements and improper revenue recognition. Then CEO David McQuillin pleaded guilty to falsifying the figures and was placed on house arrest for six months and three years of probation in 2007.

Still, the culture hadn’t changed all that much. Aspen was delisted from Nasdaq in 2008 for failing to meet the financial transparency guidelines of the exchange. After making requisite changes, it was re-listed in 2010.

Old Habits Die Hard!

With Industry 4.0 being all the rage, Emerson has been looking to shore up its capabilities and found Aspen an attractive opportunity. Earlier this week, Emerson announced it is merging its software units with Aspen in an $11B deal. This deal is seen as giving a much-needed fillip to its industrial automation business.

Called New AspenTech, this business will cater to utility, mining, chemicals, and automotive sectors. Both Open Systems and Geological Simulation will become part of New AspenTech.  Emerson is infusing $6B cash into the combined entity. As part of the deal, Aspen’s shareholders will receive $87 in cash and 42 shares of the combined company for every 100 shares they own.

Aspen’s shareholders will own a 45% stake in the new combined entity; Emerson will control the rest. New AspenTech will be led by Aspen’s current CEO, Antonio Pietri. Overall, Emerson has valued Aspen at $160 per share.

Emerson expects to realize $1.1B in efficiencies due to synergies and cost savings. The transaction is expected to be completed in Q2 of 2022 and will be accretive after the first year. But it’s not a done deal by any means.

Investor protection firm Ademi LLP is investigating whether Aspen’s board of directors failed to obtain a fair and reasonable price for the company, despite its prospects and financial outlook looking excellent. If this is true, then it would mean a breach of fiduciary duty by the board and will attract either fines or lawsuits or both or worse still, the deal not going through.

Emerson may be looking to grow its industrial software business and excited to acquire Aspen, but there are chances it’ll find Aspen to be too much of a hot potato to handle. What may be a great deal for one shouldn’t turn into a rude jolt for the other!

Market Reaction
EMR ended at $92.32, down 1.97% after Monday’s 2.5% drop. Shares are up 18% this year.

Company Snapshot 📈

EMR $92.32 -1.86 (1.97%)

Analyst Ratings (25 Analysts) BUY 48%  HOLD 52%  SELL 0%


Newsworthy 📰

Task: Boeing will require its 125K US employees to be vaccinated against Covid-19 (BA -1.28%)

Slash: Apple likely to cut iPhone 13 production due to chip crunch (AAPL -1.33%)

Optimism: Cowen upgrades Airbnb, says next year’s growth will top expectations (ABNB +3.65%)


Later Today 🕒

  • JPMorgan Chase Inc. Earnings (JPM)
  • BlackRock Inc. Earnings (BLK)
  • First Republic Bank Earnings (FRC)
  • Delta Airlines Earnings (DAL)
  • Loop Industries Inc. Earnings (LOOP)
  • 6 PM IST: Consumer Price Index
  • 11:30 PM IST: FOMC Minutes

Today’s Market Terminology: Stock Split

A stock split or stock divide increases the number of shares in a company. A stock split causes a decrease of market price of individual shares but market capitalization does not change, neither does stock dilution occur


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